Divorce isn’t just a major emotional upset – it’s also a logistical challenge, especially when it comes to the division of the marital property and debts.
In particular, deciding what to do with the family home can be one of the most complex and emotionally charged parts of the divorce. Unlike cash, stocks and even retirement accounts, real estate can have deep emotional value to its owners, and that can complicate any divorce.
So, what are your options when you find yourself in this position? You can explore some options for dealing with the house in a divorce below:
Option 1: Sell the house and split the money
Selling the family home and dividing the proceeds is a common option in divorce – and it is usually the most straightforward approach to the situation. This provides the couple with a clean financial break, which makes it easier for both spouses to move forward with their lives without any ongoing ties. It’s also a good way for each party to fund their new start after the divorce.
However, selling the house may not always be feasible (such as when there is little equity) or desirable (such as when one spouse feels very sentimental about the property and doesn’t want to leave it behind).
Option 2: One spouse buys out the other spouse’s share
In cases where one spouse wants to keep the family home, they may be able to buy out the other spouse’s share of the home’s equity. Generally speaking, this means refinancing of the mortgage into the name of the spouse who intends to retain the property and paying the other spouse their share of the home’s value.
To make this option work, the buying spouse may need to leverage other assets, such as savings, investments or retirement accounts, to come up with the necessary funds for the buyout. One common complication with this approach, however, is that it can be difficult for the spouse who wants to keep the house to obtain the financing they need on their own.
Option 3: Co-ownership for a time, followed by a deferred sale
Some divorcing couples opt to continue co-owning the family home and agree to a “deferred sale,” at some predesignated point in the future. This is particularly true when they have children and want to maintain stability for them, but it isn’t unusual in other cases where a couple has not owned the property for long and they want time to recoup their investment and build more equity.
In this arrangement, both spouses retain ownership of the property and make agreements on everything from the mortgage payments and property taxes to access and maintenance. Sometimes they will both remain in the house, albeit living separate lives. Other times, only one spouse will remain in the house until it is time for the deferred sale.
This is admittedly the most difficult option. It can be difficult to make co-ownership work unless the former spouses have a fairly amicable relationship and a very carefully crafted plan for how to handle the ordinary financial issues that arise with homeownership.
When considering these options, divorcing couples really should work closely with financial advisors, real estate professionals and others to ensure that the arrangements are fair and equitable for both parties. Legal guidance can help you decide what the best option is for your needs.